The business and culture of our digital lives, from the L.A. Times

Facebook builds lead in display ads as its IPO approaches

With the filing for its initial public offering expected any day now, Facebook Inc. is extending its lead in online display advertising, which makes up the bulk of its revenue.

The social networking giant’s share of the U.S. online display advertising market grew to nearly 28% for 2011, up from 21% a year earlier, according to research firm ComScore Inc.

Facebook has stayed ahead of Yahoo Inc., which has 11% of the display ad market — and far ahead of Google Inc. and Microsoft Corp., each of which has less than 5%, according to ComScore.

Facebook surpassed Yahoo for the first time in 2009, said Andrew Lipsman, ComScore’s vice president of marketing and industry analysis.

The new numbers show that Facebook is persuading Madison Avenue to funnel ad dollars into social media, he said. That success can be credited to Facebook Chief Operating Officer Sheryl Sandberg, a former Google executive who has been instrumental in convincing advertisers that ads on Facebook are far more persuasive because they come via a friend.

Facebook — which has more than 800 million users — also can target ads using personal information that people volunteer on their user profiles and information Facebook gathers on how people spend their time on the site. In addition, brands can form connections with consumers for free through fan pages they create on the service.

Lipsman said the ComScore research puts into perspective how Facebook has come to dominate display advertising.

“If we think back a couple of years, large brands were hesitant to use social media channels. Fast forward to today, and that has really reversed itself,” Lipsman said. “Almost 3 out of every 10 ads or so are on Facebook.”

That’s the kind of message Facebook wants to send to Wall Street as it prepares to file papers this week with the Securities and Exchange Commission for an initial public offering. The company is looking to raise as much as $10 billion in an offering that could make Facebook worth as much as $100 billion.

Facebook also collects revenue from its virtual payment system called Facebook credit. And the company takes a 30% cut of revenue generated by game developers on its site.Facebook’s total revenue in 2011 was about $4.3 billion, according to estimates from research firm EMarketer.